A Portfolio Is Comprised of Two Stocks

question 70

Multiple Choice

A portfolio is comprised of two stocks. Stock A comprises 55 percent of the portfolio and has a beta of 1.31. Stock B has a beta of .98. What is the portfolio beta?

• A) .98
• B) 1.03
• C) 1.08
• D) 1.16
• E) 1.22

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Definitions:

Expected Payoff

The predicted value or return of an investment or decision under uncertainty, calculated as a weighted average of all possible outcomes.

Perfect Information

A situation in decision theory and economics where all participants have complete and accurate information about all aspects relevant to their decision-making.

Net Present Value

Net Present Value is a financial metric that calculates the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Expected Value

The long-term average or mean of a random variable or a probability distribution.